Benefits
Close gaps before they matter
Secure a comprehensive gap analysis to identify shortfalls in your indirect rates, general ledger, total time accounting, labor costs, and job cost accounting, with targeted corrective actions before they impact revenue opportunities.
- Gap analysis
- Corrective action recommendations
Set the bar for compliant cost accounting practices
Improve cost segregation, cost allocation, unallowable cost exclusions, and hourly labor cost rates to showcase compliant operational capabilities.
- Cost practice improvements
Pass your survey to win the work
Submit with accuracy while embedding audit-ready practices into your accounting system.
- Survey preparation
- Survey submission support
- Accounting system improvements
Related
success stories
Take a deeper dive and discover how we’ve helped clients with 1408 Pre-Award Accounting Survey.
Global Investigative Service Provider
Demonstrated accounting system adequacy to meet 1408 pre-award requirements for contract eligibility
Read moreFAQs
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What does working with Capital Edge on a pre-award accounting survey look like in practice?
Capital Edge conducts a structured SF 1408 readiness assessment that benchmarks your current accounting system, indirect rate structure, cost segregation practices, and labor charging procedures against DCAA evaluation criteria. From that baseline, we develop a risk assessment and prioritized corrective action recommendations and work alongside your finance team to implement changes before survey submission. Our team, which includes former DCAA auditors and government contracts finance specialists, provides both the technical remediation and the audit submission support needed to present your system accurately and defensibly. The objective is not only a passing determination but establishing an accounting infrastructure positioned for long-term contract performance and audit readiness.
What does a pre-award accounting survey evaluate?
A pre-award accounting survey is a formal assessment, typically conducted by DCAA using SF 1408, that evaluates whether a contractor’s accounting system is capable of supporting a cost-reimbursable or flexibly priced contract. Auditors assess whether the system can segregate direct and indirect costs, exclude unallowable costs under FAR Part 31, and produce reliable cost data for billing and reporting. A passing determination is frequently a prerequisite for cost-type contract award, making the survey a direct revenue threshold for contractors pursuing defense and civilian agency opportunities. Failure to pass this assessment may preclude the award of future federal contracts.
What accounting system capabilities does the government expect before awarding a cost-type contract?
The SF 1408 criteria evaluate 18 discrete capabilities across your accounting system, including: the ability to record costs by contract and cost element, segregate direct costs from indirect costs, identify and exclude unallowable costs consistent with FAR Part 31.205, maintain labor distribution records supporting total time accounting, and produce a trial balance that reconciles to contract billings. Auditors also assess whether your indirect rate structure is logical, consistently applied, and supported by an allocation base that reflects a reasonable measure of benefit received. Each gap identified during the survey creates a potential finding that can delay or prevent award.
What happens if our accounting system does not pass?
An adverse or inadequate accounting system determination from DCAA can result in contract award delays, conditional approvals with withheld payments, or outright disqualification from cost-reimbursable contract vehicles. A failure to pass ultimately results in a lack of confidence from the government in your firm. Contracting Officers retain broad discretion under FAR 16.301-3 to require adequate accounting systems as a condition of award. Beyond lost opportunity, a failing determination creates a documented compliance gap that can affect forward pricing rate negotiations, incurred cost audit risk, and broader contractor responsibility assessments. Remediation after the fact, without prior preparation, frequently requires significantly more time and cost than a proactive readiness review.
Where do most contractors fall short when preparing for this survey?
Effective preparation begins with an internal gap analysis benchmarked against the SF 1408 evaluation criteria. The most common deficiencies involve inadequate cost segregation between direct and indirect activities, absence of a formal unallowable cost identification process aligned with FAR Part 31, the inability to calculate effective hourly labor cost rates, inconsistent labor charging practices that do not support total time accounting, and an indirect rate structure that lacks a defensible basis for its allocation methodology. Organizations entering government contracting for the first time also frequently lack the general ledger configuration and job cost accounting capabilities that auditors expect to see functioning, not merely documented, before survey submission.
Do we need specialized accounting software to pass?
The SF 1408 does not mandate a specific software platform. The expectation is a combination of processes, which demonstrably perform the required functions: cost segregation by contract, indirect rate computation, unallowable cost identification, labor distribution to final cost objectives, etc. Many contractors successfully pass using configured versions of commercially available platforms, provided their chart of accounts, cost pools, procedures, and reporting outputs are structured to satisfy audit scrutiny. The risk for most organizations is not the software itself but the configuration and the absence of documented internal controls supporting consistent, repeatable cost recording practices.
What long-term value does a compliant accounting system deliver?
A compliant accounting system that satisfies SF 1408 requirements establishes the minimum operational infrastructure needed for incurred cost submissions, forward pricing proposals, and CAS compliance as contract portfolios scale. It also reduces DCAA audit exposure by embedding audit-ready practices, accurate labor distribution, and defensible indirect rate structures into routine operations rather than reconstructing documentation under audit pressure. For contractors managing CMMC requirements, CMMC Level 2 certifications are designed to satisfy cybersecurity requirements for protecting CUI within accounting systems.
Which contractors typically encounter this requirement?
The SF 1408 pre-award accounting survey is most commonly triggered when a contractor is pursuing its first cost-reimbursable or time-and-materials contract, when contract value crosses thresholds that elevate audit priority, or when a Contracting Officer has specific concerns about cost accounting adequacy. Defense contractors responding to DFARS-governed solicitations, contractors entering cost-type IDIQ vehicles, and commercial companies pursuing federally funded research and development work are among the most frequently evaluated. Companies that have operated exclusively on firm-fixed-price contracts are particularly vulnerable, as their accounting systems are often not structured to meet the cost accounting rigors expected to perform under flexibly priced contracts.
Secure a win-win from passing your survey
Get expert guidance to pass your survey, simplify future audits, and build an engine for flexibly priced contracts that fuels new revenue streams.